Budget 2025 – reaction from Lisa Greenwood

Shocks, surprises, disappointment, anger, unexpected twists – no, it isn’t an episode of Eastenders, it’s my opinion of the Budget 2025. As I gear up to do what will probably be my last official Lambert Chapman Budget comments article, I was hoping for something spectacular to write about, but alas, it felt a little bit of an anti-climax after all the hype pre-budget. A little bit like the 2011 remake of a cult classic, Footloose – Kevin Bacon still rocks in my opinion, and Kenny Logan’s song is a dance classic in the original 1984 version.

There had been lots of speculation about what might change, and a last-minute leak of information just about sums up the current state of the government. Whilst I am not usually an openly political person, the government has continued to operate in the most unprofessional manner and certainly not as one might expect financially.  If businesses ran the way the government did from a financial perspective, many would be bust. Many years in the profession have taught me “Cash in King” and “Proper Planning Prevents Poor Performance”, and it appears that the current Chancellor has failed to deliver solutions for either of these for the country (as was probably true of the predecessor).

We currently appear to have 3rd world national services with a failing NHS and education system and the only way these improve is from investment and also ensuring that those that train within the UK for these services are encouraged to remain in the UK and are fairly rewarded rather than encouraged to leave the UK to use the skills that we have provided them with elsewhere in the world. Money needs to stop being paid to middle and higher management that can’t deliver the necessary services, and be prioritised for those on the ground who are needed to improve the nation’s health.   As an accountant over the years, I have heard shocking tales of poor investment decisions being made within NHS services that economically make no sense as long-term strategy and gains are put aside for short-term cash flow (basic 101 accounting teaches you to look at returns from investment over the longer term to gain a real understanding of the impact on a business).   Investment comes from funding, and the main issue I see from the Budget is where the funds are coming from to improve these two core services – £18m pledged to be spent on playgrounds – what about on teaching staff and actual improvement in education? A freeze in tax thresholds is being cited as the largest contribution to raising tax funds, but at what cost overall, with over changes coming in – it assumes that businesses will continue to increase wages if they can, or businesses will look to AI and other automation technology to possibly avoid using real labour?

The main hype was significant tax increases, and even though this was dispelled before the main announcement, everyone was expecting some radical tax changes. Whilst there have been changes, many are for 2, 3 and even 4 years ahead when they may not even be the current government in power. For those individuals on a dividend and salary structure, it is very likely from April 2026 that these will need to be reviewed and amended as an increase of 2% in the tax rate comes in from this date – a bid by the government to get more shareholders and directors onto PAYE and the monthly collection of PAYE rather than the two payments made personally.   Savings and Rental income also see a 2% additional rate from 2027 – penalising those that may have worked hard to gain these assets, and some may be relying on these for their pension provisions.   

From a business perspective the smaller businesses again are the ones to suffer with further increases to the National Minimum/Living Wage (NMW/NLW) – the reduction of the age limit from 25 (a sensible age in my opinion) to 21 for the NLW was a massive blow to many in the last couple of years that has not been compensated for from the increase in the Employment Allowance as this has just been eaten up by the increase in Employers NIC. Increasing the rate of NMW for those aged 18-20 is not going to encourage employment of younger individuals, as many will have left school and don’t possess any skills at this age to do the job.  Whilst they can be taken on under an apprenticeship, and the 5% contribution has been removed for those under 25, many small businesses don’t have the luxury to pay a salary for individuals who are not working full-time, especially at the relevant wage rate under NMW when it kicks in. Weighing up whether you would pay someone for 3/4 years’ experience £25k versus £22k for someone with no experience (that will certainly cost more than £3k to train up), for most it will be a no-brainer.  What does this mean for a business in terms of physical money out, it means that someone on a 37.5 hour week contract that is over 21 years old is now going to cost £1,152 more per annum (£96 per month), however the knock on effect doesn’t stop there as if wages for NMW increase other staff will expect a payrise to ensure that the gap in respect of skill base remains as it was. 

What could be the real impact of this – businesses and services relying on staff paid at NMW (this includes many supermarkets where core day to day products are purchased) are going to have to charge their customers more which means that whilst THERE IS NO INCREASE IN PERSONAL TAX OR NATIONAL INSURANCE the man on the street WILL NOT BE BETTER OFF as they are now going to be spending more money than before and have less disposable income. If they don’t spend, this means less profits for businesses, less corporation tax which could lead to redundancies, which means less PAYE, which in turn results in more benefits being paid out from taxpayers’ funds!!! If NIC or Tax had been raised by 1% for everyone, what would the impact of this have been in comparison?   

The introduction of a “mansion tax” may be welcomed, but why not go a stage further and introduce a “wealth tax” or a “tax avoidance tax” and really clamp down on those who are not paying the right level of UK tax on their income, as they hide behind arrangements that shelter income outside the UK.  If the government spent the time and effort dealing with inappropriate tax loopholes, the UK economy may be in a much healthier position much sooner – the question has to be, why aren’t they doing this? Is it because many of them are benefitting from this luxury?    

My final disappointment is that my lunchtime purchase of a cold Starbucks Latte (other brands are available) is now going to cost me more due to the increase in sugar tax – but before I got too annoyed, I was relieved to see that it doesn’t take effect until 2028, so till then I can enjoy.   Seriously, if this is linked to health and wellbeing, just increase it now or from April 2026; what are you waiting for?  I would say that the best plans now appear to be to spend all your money, don’t save for retirement or create income-generating assets, as you may be better off claiming benefits – not my professional advice, but sadly, this will be the actions taken by some. A broken system all round, including the benefits system and one that the budget certainly hasn’t addressed.